She will have full authority as the top central banker from Saturday until the swearing-in ceremony, according to the Fed.
She succeeds Chairman Ben Bernanke, whose second four-year term expires on Friday. Yellen will be sworn in by Fed Governor Daniel Tarullo, a Fed official said on condition of anonymity.
Yellen will be one of a handful of women heading central banks globally. Her main task will be to navigate the U.S. central bank's way out of its extraordinary stimulus, beginning with a further dialing down of its massive bond-buying program, and deciding when to raise rates.
(Read more: El-Erian: Bernanke's gift to Yellen)
The Fed has already announced a $20 billion reduction in its monthly asset purchases and is expected to completely shut down the program by year-end.
Yellen will remain in her current role as Fed vice chair over the weekend but will have authority to exercise all duties of the chair,the Fed said.
President Barack Obama has nominated Stanley Fischer, former head of the Bank of Israel, to succeed Yellen in the number two position. The Senate must still confirm Fischer for the job, so it will be temporarily unfilled.